Happily for them the easing of this burden does not end there. In addition to the one-off fees, plus a healthy uplift in base salaries, Messrs Staples and Co, are in line for thumping long-term incentive payments in return for a performance not likely to stretch them. Indeed the cost savings already identified from the Norweb takeover alone will probably be enough to get United Utilities a long way down the road to one of the targets, 2 per cent real growth in earnings per share over three years.
Having already sounded out institutional investors, the board is presumably confident of getting the new scheme past the annual meeting later this month. But small shareholders might wonder why they are having to fork out for performance targets that became self-fulfilling the moment Norweb was in the bag.
The Lang doctrine of competition
Is there a "Lang doctrine" of competition policy beginning to emerge from the case history of recent decision making and policy statements? A distinctive approach does indeed seem to be developing, though it is easy to see why the Trade and Industry Secretary should be accused of inconsistency.
In mergers and competition policy Ian Lang is returning to the free market principles of the early years of Mrs Thatcher's government, after the more corporatist approach adopted by his predecessor Michael Heseltine. As far as Mr Heseltine was concerned, virtually anything went, so long as it resulted in the creation of national champions capable of putting on a good show internationally. It didn't seem to matter too much if domestic competition was harmed in the process. No doubt this exaggerates and caricatures the nature of the Heseltine regime, but essentially this is what was happening.
Mr Lang's approach is markedly different. He worries much more about the effects of merger on competition, even, as shown in his decision to block the two generating bids for distribution companies, if the damage is to prospective competition rather than the world as it stands. This must ultimately be the right approach, for the destruction of competition and its replacement with powerful monopolies not only harms the consumer, but ultimately the economy too, by making it less competitive internationally. If Mr Lang has a fault, it is in his failure to adequately explain this shift in approach. His excuse is the ever-present possibility of legal challenge. Don't say too much, is the advice of DTI lawyers, or they will wack you for judicial review.
Even if this were true, which is debatable, it would nonetheless be preferable to the present state of affairs, in which industrialists and the City still do not have a clear idea of where Mr Lang is coming from. It cannot be right in a mature democracy that quite significant shifts in policy and consequent decision-making are not adequately explained because of the possibility that clever lawyers will find a way of earning a fee out of them.
Making the Stock Exchange work
The London Stock Exchange has had a dreadful few years, messing up its new settlement system and rowing with its members over new trading systems. Not surprisingly, some people wonder whether the real fault lies with the structure of the organisation itself. The conventional view is that the Exchange has had difficulty adapting to developments in world markets because it has had to cope with the powerful vested interest of big market markers, who dominate trading. If this is true, yesterday's drastic cutbacks are hardly going to solve the problem.
One proposed solution would for the Exchange to set itself up as an independent public company with an executive management able to take the harsh decisions required to prosper against competition from European and US exchanges. The nub of the argument for radical reform is that the Exchange is too important to London as a financial centre to be left to its members, who cannot see beyond the end of their self-interested noses. The public interest requires the Exchange to evolve from a trade association into a proper business.
It is hard to see the point of this. The big members are responsible for the largest part of share dealing in London. The only way a large marketplace will continue is if it is continually adapted to their needs. The best practical discipline on the Exchange is to encourage as far as possible the development of other competing markets in London.
Cable foolish to tangle with Sky
The cable TV industry perhaps ought not to trumpet its "victory" over BSkyB too loudly, as even a cursory glance at the relevant figures confirm. The Cable Communications Association proudly announced yesterday that the industry's total revenues were likely to exceed pounds 1bn this year, compared to just under pounds 1bn for BSkyB, the satellite TV company. Amazing. The problem is that the comparison is an entirely spurious one. For a start, most cable operators make the bulk of their money from selling telephone services, not cable TV. Sky, whatever else it might be called, is not a telephone company.
Nynex, the country's second largest cable operator, earned twice as much revenue last year from telephony (residential and business) than from cable TV, and that record is broadly indicative of the whole industry. In fact cable television itself will generate just pounds 400m this year for the industry. This compares with the pounds 600m Sky will get from its direct- to-home subscribers. On top of that Sky makes a big chunk of money from providing the cable operators with the bedrock of their TV channels, making cable's "we beat you" comparison look even more ridiculous. Quite a bit of what the cable operators make out of television is just re-routed Sky. Cable has got some things to boast about. It is winning 60,000 new telephone customers a month, and is responsible for more than 50 per cent of new subscribers to Sky. By 2005, its subscriber base is likely to outstrip Sky's by 2 to 1. But to claim it is beating Sky is just silly.Reuse content